Environmental considerations

The extraction of unconventional oil and gas is an industrial
process and, as with most industrial processes, if not
appropriately undertaken and controlled, it could result in adverse
impacts to the environment and to local communities.

This section summarises and discusses the studies we
commissioned in 2016 to examine climate change, decommissioning and
risks of induced seismicity. The section also discusses regulation
and how it could be strengthened.

Unconventional oil and gas, and Climate Change

The Scottish Parliament has set ambitious climate change targets
to reduce emissions of greenhouse gases by 80% by 2050, from 1990
levels.

As of 2014, we have delivered a 45.8% reduction from baseline
levels
[18] meeting our annual target for that year and exceeding our
2020 target for a 42% reduction, six years early.

The Scottish Government's third Climate Change Plan, which was
published in draft on 19 January 2017, shapes and sets out our
approach to tackling climate change and paving the way for
Scotland's transition to a low carbon economy.

The current policy on unconventional oil and gas is a
moratorium, pending a decision after this public consultation. As
such, the draft Climate Change Plan does not consider the potential
role of, or emissions from, unconventional oil and gas.

Greenhouse gas emissions can occur at different stages of an
unconventional oil and gas development. Some of these emissions
will be carbon dioxide (
CO
2), and others will be methane. The
UK Committee on Climate
Change note that the Fourth Assessment of the Intergovernmental
Panel on Climate Change indicates that a tonne of methane emitted
is equivalent to 25 tonnes of
CO
2 in terms of its warming potential.

The Committee on Climate Change have identified the following
main sources of emissions from an unconventional oil and gas
development:

Fugitive emissions, which include both vented
emissions and unintentional leaks. Vented emissions are a result
of planned releases, where permitted, as a result of maintenance
operations and safety concerns. Unintentional methane leaks
include those from valves and pipe joints, compressors, well
heads, and accidental releases above and below ground from the
well, through to injection into the grid or before being put to
use.

Combustion emissions that occur from on-site
burning of fossil fuels. The emissions come from engines, such as
those used for drilling and hydraulic fracturing, as well as from
any flaring of gas.

Indirect emissions that result from transporting
materials and waste to and from a site.

Land-use change emissions, which include the
CO
2 released when land is converted from one
use to another, as well as any emissions relating to land
remediation during decommissioning.

Research findings: potential climate change
implications

In response to the potential significance of emissions from
unconventional oil and gas to Scotland's ambitious climate change
agenda, we asked the Committee on Climate Change to provide us with
advice on the potential impact of unconventional oil and gas on
Scottish and global greenhouse gas emissions.

To examine these issues, the Committee on Climate Change used
the production scenarios developed by the study exploring economic
impacts, which are discussed on PDF page 29.

A summary of the main research findings is provided below.

What would be the impact of unconventional oil and gas
production in Scotland on our greenhouse gas
emissions?

The Committee on Climate Change's assessment is that
exploiting unconventional oil and gas reserves on a significant
scale is not compatible with Scotland's climate change targets
unless:

- Emissions are limited through tight regulation. Within this,
much greater clarity is necessary over the respective roles of
different actors in the regulatory system, particularly around
fugitive emissions.

- Fossil fuel consumption remains in line with the requirements
of Scottish emissions targets. Scottish unabated fossil energy
consumption must be reduced over time within levels previously
advised by the Committee. This means that Scottish unconventional
oil and gas production must displace imported gas rather than
increasing domestic consumption.

- Emissions from production of unconventional oil and gas are
offset through reductions in emissions elsewhere in the Scottish
economy.

Central estimates are for emissions from unconventional oil
and gas to reach 2.6 Mega tonnes per year (Mt)
CO
2 equivalents in 2035 for unregulated
production under the economic impact and scenario development
High Production scenario. Emissions fall to 1.6 Mt under a
'minimum necessary regulation' scenario, and to 1.1 Mt with
fuller technical mitigation.

Under the central production scenario, emissions are
estimated to be 0.6 Mt per year in 2035 if the minimum necessary
regulation were adopted.

To put these figures into context, the annual emissions
target in 2032 is 26.4 Mt of
CO
2 equivalents.

The high level of ambition embodied in Scottish annual
emissions targets means that finding offsetting effort elsewhere
in order to accommodate even moderate additional emissions from
unconventional oil and gas production or other sources (
e.g. aviation) would be challenging.

The implications for greenhouse gas emissions of
unconventional oil and gas exploitation are subject to
considerable uncertainties, both regarding the size of any future
industry and the emissions footprint of production. The research
sets out a number of potential emission trajectories under a
number of different scenarios.

What would be the impact of unconventional oil and gas
production in Scotland on global greenhouse gas
emissions?

The overall emissions footprint of Scottish shale gas, if
tightly regulated, is likely to be broadly similar to that of
imported gas. Tightly- regulated domestic production may provide
an emissions saving when displacing imports of liquefied natural
gas, and would provide greater control over the level of
emissions associated with supply.

Initial evidence suggests that tightly-regulated shale gas
production is likely to have a broadly neutral impact on global
emissions, with emissions savings due to switching from
higher-carbon fossil fuels approximately offsetting emissions
increases due to increased use of unabated gas.

Within the context of a world committed to decarbonisation,
it is likely that domestic production of hydrocarbon liquids
would displace high-cost production elsewhere in the world,
rather than increasing overall oil product consumption or driving
fuel switching.

How might these impacts vary over time?

The emissions relating to production grow over time, broadly
in line with the growth in hydrocarbons produced, peaking
slightly after 2035 under each scenario.

Research findings: Decommissioning and
aftercare

Recent experience with the remediation of open-cast coal sites
in Scotland has highlighted the importance of robust
decommissioning and restoration regimes. Robust regimes mean
ensuring operators comply with their obligations, and communities
and the public sector aren't left to deal with restoration and
aftercare issues and costs.

The Expert Panel report summarised the key issues relating to
decommissioning and remediation, including potential risks arising
from well integrity. The Expert Panel report also highlighted
potential gaps in aftercare requirements and long-term
monitoring.

To understand these issues in more detail we commissioned
research to tell us more about potential environmental risks,
industry best practice, and the adequacy of regulatory controls
over decommissioning, including for long-term
monitoring.

A summary of the main research findings is provided below.

What steps can be taken to ensure decommissioning, site
restoration and aftercare can be undertaken in a way that minimises
impacts on communities and the environment?

Scotland has a mature framework for the regulation and
control of unconventional oil and gas development which is at
least the equal of those examined in other countries or other
industries. With appropriate regulatory oversight and monitoring,
the framework is sufficient to manage risks of well leakage
consistent with the aim of providing suitable protection for
communities and the environment.

The risk of leakage from abandoned wells is likely to be low,
and international experience suggests that long-term well
integrity can be achieved by implementing best practice during
well construction and abandonment operations under a strong
regulatory regime.

There is a risk that a small proportion of wells may fail.
Leaks may occur from these wells if there is a source of oil or
gas under pressure (which is generally not the case). Therefore
it may be appropriate to monitor for leakage from decommissioned
wells for as long as Scottish Environment Protection Agency
consider necessary.

What forms of financial guarantee provide robust security
against liabilities?

It is essential that unconventional oil and gas operators
have sufficient funds available to cover liabilities associated
with the abandonment and decommissioning of wells.

Taking lessons from open cast coal mining there are financial
mechanisms available which can minimise the risk of operators
failing to honour their commitment to decommissioning.

Research findings: Risk of increased
seismicity

Many activities involve small amounts of induced seismicity
(ground vibrations or earthquakes) including construction,
quarrying and many commonly occurring drilling operations.

The Expert Panel also noted that data compiled from American
sources suggests that induced seismicity from hydraulic fracturing
is typically minor and unlikely to be felt by individuals.
Nevertheless, a more significant seismic event was attributed to
hydraulic fracturing operations in Lancashire in north-west England
in April and May 2011.

Experience from North America suggests that disposing of
wastewater from hydraulic fracturing by re-injecting it into the
ground can result in an increased risk of seismic activity.

We therefore commissioned research to develop a better
understanding of the risks of seismic activity that could be
presented by unconventional oil and gas developments in
Scotland.

A summary of the main research findings is provided below.

What levels of induced seismic activity could be associated
with unconventional oil and gas developments in
Scotland?

Hydraulic fracturing is accompanied by seismic events of low
magnitude. The magnitudes of these events are usually less than
2.0 making them too small to be felt by people.

The process of hydraulic fracturing as presently implemented
poses a low risk of inducing felt, damaging or destructive
earthquakes.

What regulatory and non-regulatory actions can be taken to
mitigate any noticeable effects on communities?

Recent increases in earthquake rates and significant
earthquakes in many areas of the United States where hydraulic
fracturing is undertaken have been linked to the disposal of
wastewater by injection into deep wells rather than hydraulic
fracturing itself.

In the
UK, following induced
seismicity near Blackpool in 2011, the
UK Government put steps
in place to mitigate risks. This included identifying a limit of
0.5
ML where operations
should be halted. An event of this magnitude is unlikely to be
felt, does not pose any seismic hazard, and would only be
detected by sensitive monitoring equipment in the vicinity of the
epicentre.

The study concludes that a dense network of monitoring
stations is essential for reliable detection and discrimination
of induced seismic events, and to allay public concern.

Regulation of unconventional oil and gas

As outlined by the Expert Panel, the existence of a potential
impact does not mean that it will occur, and effective regulation,
best practice and other assessments can reduce, or eliminate,
adverse occurrences.

A regulatory framework already exists in Scotland, which covers
the vast majority of activities requiring control and monitoring as
part of unconventional oil and gas developments. Figure 9
summarises some of the main controls.

The Expert Panel observed that this framework is generally well
coordinated between the main regulatory bodies.

The following section provides information on the current
regulatory framework for unconventional oil and gas developments.
This is followed by a discussion of areas where the framework could
be strengthened.

The current regulatory framework

As discussed on PDF page 13, rights to oil and gas in a given
area are governed by a licensing system. There are currently three
licences for unconventional oil and gas in Scotland, all of which
were issued by the
UK Government. The
Scottish Government moratorium means that there is no
unconventional and gas activity in these areas.

The licences do not give the licence-holder automatic permission
to begin exploration, appraisal or extraction as a range of other
planning and environmental permits are required before a
development can commence.

The focus of the planning system is on determining whether a
proposal is an appropriate use of land, but other regulatory
regimes covering health and safety and environmental protection
would be relevant to the consideration of an application or
planning permission.

Underground operations as well as above ground development can
only be undertaken once planning permission has been granted.
Planning Authorities are responsible for considering planning
applications for works associated with an unconventional oil and
gas development. Further information on factors considered during a
planning application is provided on PDF page 33.

The Scottish Environment Protection Agency (
SEPA)
regulate specific activities that may cause pollution or pose other
risks to the environment. For example,
SEPA
consider applications for licences under the Pollution Prevention
and Control (Scotland) Regulations 2012, to control emissions to
air, land and water and the Water Environment (Controlled
Activities) (Scotland) Regulations 2011, to control borehole
construction, abstraction of water from surface water or
groundwater, and activities that are liable to cause pollution of
the water environment.

The Health and Safety Executive regulate to ensure the operator
is managing the health and safety risks appropriately throughout
the life cycle of an unconventional oil and gas development.
Operators must notify the Health and Safety Executive about the
design, construction and operation of wells and must prepare a
health and safety plan which sets out how health and safety risks
are managed on-site. Health and Safety Executive specialist
inspectors scrutinise the information provided by the operator and
further information provided each week during the abandonment
process to ensure that the well is being abandoned to the correct
standards.

Local Authorities are responsible for Environmental Health
matters, which includes protecting the public from the harmful
exposures they may encounter in the environment. Local Authorities
also require waste to be managed in a way that minimises risk to
human health and the impact on the environment, and are regularly
required to review and assess air quality against the objectives
contained in the Air Quality Strategy for England, Scotland, Wales
and Northern Ireland.

The Expert Panel concluded that 'The regulatory framework is
largely in place to control the potential environmental impacts of
the production of unconventional oil and gas in Scotland, although
there may be gaps to address'.

The Expert Panel highlighted the strength and quality of
regulation in Scotland, and that there are considerable legislative
safeguards to ensure that potential impacts are not realised. The
Expert Panel also identified specific regulatory issues that could
create gaps in the regulatory framework and where regulation could
be strengthened or transparency enhanced.

In response to the Expert Panel's conclusion, and to inform this
consultation, the research projects commissioned by the Scottish
Government were asked to examine relevant regulatory issues and
lessons from international best practice. The Scottish Government
also hosted a workshop in October 2016 with the main regulators to
discuss regulation and the issues identified by the research
projects and the Expert Panel.

Air Quality: The Independent Expert Scientific
Panel noted that some air emissions, including fugitive emissions,
may not be fully regulated under current arrangements. The
Committee on Climate Change also observe that greater clarity is
necessary over the respective roles of different bodies to ensure
full coverage of greenhouse gas emissions.

The Scottish Government considers that amendments to legislation
to bring overarching coherence to the regulatory framework for air
emissions would be necessary, which could include a single or lead
competent authority to regulate all sources of emissions across the
lifetime of a project.

Decommissioning: The decommissioning study noted
that there is currently no power to require specific arrangements
for well decommissioning and aftercare if a company fails financial
tests after consent to drill a well has been given. The study
observed that financial strength tests could be run regularly, with
greater emphasis on testing the sufficiency of funds to cover
decommissioning and restoration costs. Where a company fails a
financial test, provisions such as Parent Company Guarantees,
insurance, bonds or letters of credit or payment into escrow
accounts could be required.

The study also observed that there is a low probability of well
failure. If such a failure did occur, long-term insurance products,
or a mutual-fund, could be required to cover the costs of repairing
wells that fail following decommissioning, and any accompanying
remediation.

Induced Seismic Events: The
UK Government has issued
guidance that operations should cease if seismic events of 0.5
ML or greater are
induced. The study examining seismicity notes that existing
monitoring networks are not capable of reliable detection and
location of these magnitude levels, and that improved monitoring
and measurement are required to implement the system
successfully.

Further observations from the research on how regulation
could be strengthened:

A Health Impact Assessment, Environmental Impact Assessment and
Traffic Management Plan could be required for all planning
applications relating to unconventional oil and gas
developments.

Improved engagement with the local community could be required,
including release of data to enable communities to scrutinise
operational standards, and increased transparency of chemicals
used.

Improved baseline monitoring of environmental and health data to
allow any environmental and health impacts to be effectively
identified.

Establishment of appropriate setback distances, in order to
minimise risks to residents and to address risk perception
issues.

The delegates at the workshop held in October 2016 agreed that
the following points should guide any future analysis of the
regulatory framework:

the observations on regulation made by the researchers and
during the workshop would form a basis for organising work to
examine how regulation could be strengthened if that was to be
required;

that an effective approach, in the event that it is required,
to advancing such work would be the formation of an Expert
Regulatory Group, chaired by the Scottish Government with
representation from the regulators present at the workshop;
and

the group would require access to technical and legal
resource, would make use of existing professional networks and
would consider community impacts and involvement.

SCOTTISH GOVERNMENT OBSERVATIONS ON THE
EVIDENCE

An unconventional oil and gas sector in Scotland is likely to
have a broadly neutral impact on global greenhouse gas emissions if
it is tightly regulated.

However, within the context of Scotland's climate change
legislation, an unconventional oil and gas industry would create
challenges in meeting Scotland's ambitious and world-leading
climate change targets.

In respect to environmental regulation, the research project
findings are broadly consistent with the findings of the
Independent Expert Scientific Panel, which concluded that 'The
regulatory framework is largely in place to control the potential
environmental impacts of the production of unconventional oil and
gas in Scotland, although there may be gaps to address'.

The study examining seismicity concludes that the risk of felt
earthquakes from unconventional oil and gas developments is low.
However, where disposal of wastewater by reinjection into a
hydraulically-fractured well has been permitted in North America,
there is evidence it has increased the risk of earthquakes. We note
that this form of wastewater disposal is not a practice that has
been proposed by industry in the
UK.

We are committed to undertaking all relevant statutory
assessments in coming to a final position on unconventional oil and
gas, including undertaking a Strategic Environmental Assessment,
which would be required regardless of the form of our final
decision.

The regulators are confident that the research we have
commissioned has provided a clear analysis of where regulation
could be strengthened in key areas.

Consultation questions

This section discussed potential environmental and climate
change implications of an unconventional oil and gas industry in
Scotland, and the findings from the evidence we have commissioned
to examine these issues.

In answering the following questions, please consider whether,
in your view, there are any specific gaps in the evidence
presented.

Q5: What are your views on the potential environmental
impacts of an unconventional oil and gas industry in
Scotland?

Q6: What are your views on the potential climate change
impacts of unconventional oil and gas industry in
Scotland?

Q7: What are your views on the regulatory framework that
would apply to an unconventional oil and gas industry in
Scotland?